It completes a recipe for an economic crisis that has not happened in decades

Record data on US inflation made investors pricing in the possibility of an interest rate hike Federal Reserve not by half anymore, but even by a whole percentage point. And this is already at the next meeting, which will be held on Wednesday.

Along with the change in estimates of the June move by the Fed, the alleged ceiling of the entire cycle of interest rate increases is also shifting from 3 to 4 percent.

Black start of the week on stock exchanges and the cryptocurrency market

It seems that for fear of a rapid tightening of the monetary policy in the United States and increasingly difficult access to money, American bonds, shares and cryptocurrencies are losing their value. Suffice it to mention that on the American stock exchanges S&P 500 index yesterday fell by 3,9 percent, Dow Jones by 2,8%, a Nasdaq Composite by 4,7 percent, i.e. by over 33 percent in total. since his November record.

Bitcoin price today fell below 22 thousand. USD, reaching the lowest level since December 2020. Since the beginning of this year, the most popular cryptocurrency has lost 52% of its value. Even more, ie by 68%, became cheaper this year, ethereum.

There have been no such changes for several dozen years

Fear of violent Fed actions may also increase fears of recession. There is a risk that, in combination with high inflation, it will turn into stagflation, which in turn would have a negative impact on the labor market, and this already constitutes a recipe for a very serious global economic crisis - comments Daniel Kostecki, director of the Polish branch of Conotoxia Ltd.

And he adds that the transformations that are currently taking place in the financial markets have not been observed for decades. For example, the two-day change in US bond rates was the largest since 1987.

- It also shows how quickly the market is discounting the new reality. The fall in bond, stock and cryptocurrency prices has also shown that all capital flows from these markets can still go to the US dollar. The EUR / USD exchange rate has already dropped to 1,04, which is the lowest level in weeks - notices Daniel Kostecki. 

ECB without any sudden movements

Plans can also affect the prices of the main currency pair European Central Bankwhich will end asset purchases on July 1 and then raise interest rates by 25 or 50 basis points.

The ECB also signaled that a larger interest rate hike may be necessary in September if the inflation outlook worsens. Annual inflation in the euro area broke new records in May, and new ECB forecasts predict that it will amount to 2022% in 6,8 and then fall to 3,5%. in 2023 and 2,1 percent. in 2024

Half percent move - that would be a relief

What are the assumptions of the Fed on this topic? We will find out on Wednesday evening during the publication of the latest macroeconomic projections.

- There seems to be the only argument for the Fed not to raise interest rates by 0,75 or 1 percentage point. is the discrepancy between CPI inflation and core inflation. The former rose to 8,6% in May, reaching the highest level in 41 years. The latter dropped for the third month in a row to 6,0%, while in March this year. was 6,5 percent In the current market situation, the interest rate hike in the US by 0,5 percentage point. could bring the so-called relief rally on multiple asset classes - concludes the director of the Polish branch of Conotoxia Ltd.